The strike price of an option is the price at which a put or call option can be exercised. Along with expiration date, it’s one of the two key choices you have to make when initiating an options trade. But why are there so many and how are they different?

Options have rights and obligations that you need to know before you start trading. Call buyers have the right to buy shares, while put buyers have the right to sell shares. On the other hand, option sellers have the obligation to buy or sell shares of stock.

Profit and loss diagrams, or risk graphs, make visualizing risk simple by showing you the various profits or losses that will occur at different stock prices. They offer a quick look at the maximum gains, losses, and break even points of a stock or options trade.

Stop orders and stop limit orders allow traders to buy or sell as stock if a specific price is reached. They’re useful tools that can help you remain disciplined as a defensive exit strategy should losses begin to mount. But to use them properly, there’s plenty of nuance you need

Before buying or selling an option, it’s important to understand the price you’re being quoted for the trade. The bid-ask spread is the difference between the price quoted for an immediate purchase and an immediate sale. While size of the spread reflects market liquidity and the cost of trade.